H-1B visa limits hamper U.S. economy, study finds

Capping the number of visas issued to foreign-born tech workers restricts the number of U.S-born workers that firms could hire - and the Bay Area is feeling the brunt of that impact, according to a new study.

Tech interests have long wanted to increase the number of temporary guest worker visas, known as H-1B visas, arguing there's a shortage of qualified U.S. tech workers to fill available jobs. This year, applications for 85,000 available H-1B visas hit the limit in five days.

Critics, however, say that employers prefer foreign workers because they can hire and retain them at a lower cost.

The study released this week, co-authored by UC Davis economics Professor Giovanni Peri and funded by the bipartisan Partnership for a New American Economy, examined how capping the number of visas in 2007 and 2008 affected job growth in various U.S. regions.

'H-1B shock'

The authors found that inability to hire more foreign workers created what the study's authors call an "H-1B shock" on others parts of the economy. They measured that in terms of how the tech workforce would have grown had more visas been approved.

In terms of "H-1B shock," the tech-rich Bay Area was one of the hardest hit larger metro areas, according to the study. H-1B visa denials during that period caused San Francisco to miss out on creating as many as 4,219 tech jobs for American-born workers.

"As the company becomes more productive because of the contributions of these (foreign-born) people and grows, then it will demand more workers - workers who are there (in the U.S.) will participate in the growth of the company," Peri said Thursday.

Of that total number of tech jobs that weren't created, the study found that as many as 3,181 were lost for U.S.-born less skilled workers in the tech industry.

Nationally, the study contends that visa denials in that two-year period has subsequently caused the U.S. to miss out on creating as many as 231,224 tech jobs for American-born workers.

"This important research is the latest contribution to the overwhelming body of work that makes the clear case that fixing our broken immigration system and passing reform legislation will boost economic growth, create American jobs and maintain the U.S.' competitive advantage in a modern, global economy," said Kate Hansen, a spokeswoman for Fwd.us, an issue advocacy group funded by Facebook CEO Mark Zuckerberg. The group has been at the forefront of the political effort on immigration.

But other experts say tech companies prefer to hire foreign-born workers through the visa program because they are less likely to leave the company due to the red tape of finding another employer willing to sponsor them in the U.S.

"There is a broad consensus that H-1B does suppress wages for the tech workers," said Norman Matloff, a UC Davis professor of computer science and a longtime critic of the tech industry's cries about a labor shortage.

Data lacking

Besides, Matloff said, according to his research "the industry has never, ever supplied any data to back up that claim" that the visa program is not bringing the "best and brightest" of international workers to the U.S.

"Compared to Americans of the same education and age, the former foreign students turn out to be weaker than, or at most comparable to, the Americans in terms of salary, patent applications, Ph.D. dissertation awards, and quality of the doctoral program in which they studied," Matloff wrote last year in a study for the Economic Policy Institute. Several labor union leaders serve on the institute's board of directors.

Others say that intent of the H-1B visa program has been twisted.

More than half of the visas granted last year went to offshore outsourcing firms, according to research by Ron Hira, an associate professor of public policy at the Rochester Institute of Technology in New York.

And while the region's economic growth may have been slowed in the past by visa restrictions, these days San Francisco's economy is humming along. Its 4.4 percent unemployment rate in April was its lowest level since 2008 and well below the state figure of 7.3 percent.